Credit System in Romania
Credit System in RomaniaUpdated on Sunday 17th April 2016
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Market economy implies a banking system aiming to ensure mobilization of the economy and monetary availability orientation to conduct efficient business. Banks are financial institutions that concentrate the means of payment and provide loans, facilitating settlement of the market.
In a market economy, the banking system performs the function of attracting and concentrating the company's savings and channelling them through an objective and impartial allocation of credit to the most effective investment.
A commercial loan is accorded to economic agents for selling merchandise in the form of postponement payments. The advantage of this form of credit is that entrepreneurs can sell their production without needing to wait until the buyer has the financial resources to buy. The commercial loan is considered to accelerate real capital flow.
The commercial credit is limited by the regularity of cashing for counter goods. This type of credit limit derives from use of the goods sold by this type of loan as the two participants in the credit report must belong to the same economical sector.
Another type of credit is the bank credit. Participants in bank credit are generally represented by a non-bank agent (manufacturer or trader) on one hand and by the bank institution on the other.
The bank loan has the advantage of greater flexibility compared to commerciall loan, as the amounts can be directed towards different forms of economic activity.
Between the commercial the banking credits are strong connection as in certain situations the commercial loan can be trasformed in bank credit or it stand as a support for obtaining a commerical credit.
A European directive also applicable in Romania aims both uniformity and better protection of consumers. The credit providers promoting a specific interest rate should provide information on the credit terms (the maximum amount, taxes, annual interest rate). Moreover, European consumers will have to get, before signing a credit agreement, a standard form that contains essential information for consumer loans in all EU countries, with key facts and figures from the interest rate, the fees and the need assurance. Also, the annual percentage rate (APR) is calculated by a unique method in the entire EU. It is the average interest rate paid on credit year, expressed as a percentage and calculated according to the duration of the loan. This will allow the consumer to easily compare the costs of different types of credit.
In Romania the credit agreement should specify clearly and concisely issues such as:
- the type of credit ;
- the identity and address of the registered office and the working point / home address of the contracting parties
- the total amount of credit and the conditions governing the drawdown;
- in the case of a credit in the form of deferred payment for a specific good or service, or in the case of linked credit agreements, that good or service and its purchase price;
- the interest rate;
- the conditions governing the application of the interest rate, its formula and terms, conditions and procedure for changing the interest rate;
- the amount, number and frequency of payments to be made by the consumer and, where appropriate;
- no charge for specific information and documentation in case of reimbursement;
- the interest rate in case of late payments;
- a warning of the consequences of missing payments;
- necessary security guarantees , if any;
- the right of early repayment, prepayment procedure, and, as applicable, information concerning the creditor's right to compensation and how compensation will be determined;
- the procedure to be followed in exercising the right to terminate the credit agreement;
- the address of the National Authority for Consumer Protection .